Tuesday, January 18

Astral income increases 14%, but earnings suffer


Poultry group listed on JSE Astral Foods Recorded a 14% increase in revenue in the year to September 30, from R13.9 billion to R15.9 billion, according to their results statement released Monday.

The company attributes this increase primarily to the broiler operations in its poultry division, contributing R1.7 billion as a result of growth in broiler sales volumes, as well as a recovery in the sale price of products. poultry.

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However, Astral’s earnings for the full year decreased by 16% to R437.7 million (2020: R561.2 million) after being hit on several fronts by issues such as the sharp increase in the prices of poultry feed from corral, cargo shedding, interruptions in the provision of municipal services in its operations in the Lekwa municipal district in Standerton, and damage to its infrastructure during the July riots.

Read:

According to Astral, the price of yellow corn on the South African Futures Exchange (Safex) increased 22% to R3 363 per tonne in 2021, while soybean meal prices soared 24% to R8 216 per tonne.

This contributed to operating profit in the group’s poultry division falling 50.3% to R147 million (2020: R295 million).

Astral said non-food related expenses at the division “increased year over year, negatively impacted by the direct cost of highly pathogenic avian influenza. [R49 million], looting and damage to infrastructure [R18 million], ongoing costs of Covid-19 [R14 million], as well as interruptions in the supply of water and electricity. [R27 million] … which leads to “the operating profit margin reduced to 1.1% [2020: 2.6%]”.

However, the group also benefited from the increase in feed prices.

“Revenues from the feed division increased 18.9% to R8.3 billion [2020: R7 billion] as a direct result of higher sales prices due to the increase in raw material costs ”, he noted, adding that“ the operating profit of this division increased by 4.2% to R530 million ”.

Read: RCL Foods climbs to 52-week high as returns to earnings

Commenting on the latest results, Astral CEO Chris Schutte said: “The group’s tried and tested strategy has supported a strong set of results in prevailing market conditions and a challenging operating environment, which has seen enormous Pressure. [bear] about the local poultry industry over the past year. ”

He added: “The state of the South African economy has experienced record unemployment and severely restricted disposable income, limiting the ability to recoup higher input costs and putting pressure on the industry.

“Despite the very good South African maize harvest for 2021, which is expected to be repeated in 2022, we continue to witness volatile commodity markets in global supply and demand factors.”

Schutte once again regretted the widespread poor municipal service delivery in the country, as well as the reduction in load across the country, which he says continues to have a negative impact on Astral’s operations.

“[This] adds an unnecessary cost burden to chicken production in South Africa. ”

However, Astral noted in its results press release that trading conditions have improved as the economy continues to recover due to the easing of the Covid-19 lockdown restrictions.

The group says that the retailers’ promotional activity has resulted in higher sales volumes.

“The fast food industry, as well as the fresh produce sales categories, have recovered to pre-Covid-19 levels.”

Astral declared a final dividend of 400 cents per common share. Along with his interim dividend, his payment to shareholders actually amounts to 700 cents per share.

Small Talk Daily analyst Anthony Clark tells Moneyweb that Astral’s results are “reasonable in light of the extremely challenging input cost environment” for most of the past 12 to 18 months.

“The soaring price of commercial corn, [and] volatility in soybeans and sunflowers are all key inputs in the broader feed mix. Approximately 68% of all Astral costs are derived from food, “he says.

Read: South Africa’s Corn Production Expected to Increase 10% in 2021

“So when costs increase exponentially, or they have to raise prices to recoup the cost or if they cannot raise prices due to the very difficult operating environment we face as a country, the underlying weakness in consumerism and Covid -19 means that the margins are shrinking, “adds Clark.

“Chicken farming is all about the efficiency and optimization of your plant facilities. If you can get more product through a better facility, then your underlying costs of production start to go down and that’s where Astral is. They are absolutely excellent farmers and operators in the slaughterhouse system. That has helped them mitigate some, but not all, of the underlying price increases in soft commodities, ”he says.

“The expansion they did in key operations a couple of years ago [ago] it has improved efficiency and will raise eventual slaughter rates from around 5 million birds per week to 5.8 million ”.

* Palesa Mofokeng is a Moneyweb intern.


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